31st August 2016 – Forget the future relationship question. The UK will have to negotiate it’s exit terms first.

There was a question from Will Rickson in the Facebook Group ‘The 48%’ on why the UK could not simply leave the EU without negotiations, and then deal with it’s own legal aspects itself later. It’s a good question, and I would imagine most people cannot begin to imagine the vast complexity of the actual exit negotiations, which have to take place before there is any negotiation on what form the UK’s future relationship with the EU.

I think a lot of the confusion about this is that the focus has been entirely on changing UK law, and has largely ignored the EU’s end of the negotiations.

For example, the UK has agreed to the current EU budget for 2014-2020, and is now unlikely to leave much before 2020. The way the EU budget works is that it has 2 columns: Commitments and Payments. Commitments are made in a given budget year (so this side of the budget controls how much the EU can, in a given year, commit to spending in the future on something), and those commitments are then spent over the next 3-5 years (with the actual money coming from the Payments column of the budget for each year in which the actual financial payments take place. This is actually a pretty useful system, as it allows longer-term budget planning than the traditional single-year income/expenditure type of budgeting system that most countries use.

This however means that the UK will have signed up to Commitments made while it is still a member, but the actual money for those projects will only be paid after the UK leaves. So, there has to be a negotiation on how that works, with, no doubt, the UK wanting to pay little or nothing to the budget after leaving, and the EU27 wanting the UK to cough up for stuff it committed to.

This is further complicated by the fact that, in some areas, such as climate change and international development, the UK will only be meeting the targets for spending it agreed to internationally because of the EU spending, and it is unlikely, what with all this pesky Brexit work going on, that it would be able to meet these commitments through its own spending. Furthermore, lots of the commitments that need payments to be made will be for spending in the UK. It’s an utter minefield, and this is just one single question about one aspect (budget) of the negotiations.

Take another example in my former area of work. UK firms and charities are currently eligible to apply to implement EU international development (aid) projects, and many currently are doing this. What will be their status? will they carry on implementing the projects they are doing and then cease to be eligible for new ones, will they retain their eligibility, or will the projects have to stop and a new tender be done? The UK’s department for International Development (DFID) is also an EU implementing partner, and administrates EU funds in several countries. Will this continue or not? These are not necessarily terribly difficult questions, but they are ones that need answers and on which agreement has to be reached. I was the lead negotiator for the UK for the current EU aid legislation, and that took two and a half years to negotiate even though there was broad consensus from the start!

As a final example, the UK is the joint largest shareholder in the European Investment Bank, with just shy of EUR 40bn in capital in it. The EIB is an EU institution that finances infrastructure projects and other investment in the EU and across the world (including a very large portfolio in the UK). It’s shareholders are the EU member states, so what happens to the UK? Does the bank simply give back the UK’s invested capital, even as projects are ongoing in the UK financed by the EIB? And what happens to those projects? Do they stop, as the UK is no longer eligible? The last EIB mandate (the EU legislation that allows the EIB to operate and directs how it should do so) took several years to negotiate, so again, this is not going to be easy or quick.

These are just three examples, and there are hundreds, and probably thousands of other examples of where similar negotiations will be needed.

Why does this matter? Can’t the UK just leave and to hell with it? Well, firstly, the commitments it has made are legal contractual commitments and it would be breaking UK, EU and international law to renege on them, so there has to be an agreement on what to do. Secondly, the nature of the negotiations on the future relationship will, naturally, depend to a large extend on how the negotiations to leave go. If the UK is an arse about the first, the EU27 will naturally be arses about the second, and, in that case, rightly so.